Justice Dept. Seeks Tougher Enforcement Against Pandemic-Related Misdeeds

WASHINGTON — The Justice Department’s tougher stance against COVID-19 fraud and misdeeds is showing up in recent announcements of prison sentences for people making false claims for million-dollar government loans.

So far this month, they have included a former Seattle, Washington, doctor who applied for $3.5 million in Paycheck Protection Program benefits and Economic Injury Disaster Loans.

The Trump administration offered the money to business owners to help them continue operating during the worst of the pandemic shutdown.

U.S. Attorney General Merrick Garland said last week the Justice Department was placing a higher priority on prosecuting the fraud cases.

The Seattle doctor, Eric R. Shibley, 43, was sentenced to four years in prison.

Prosecutors said Shibley submitted 26 fraudulent PPP applications and 13 EIDL applications to federally insured financial institutions and the Small Business Administration on behalf of nonexistent businesses.

To support the fraudulent applications, Shibley allegedly submitted fake tax documents and names of employees he did not employ. A jury convicted Shibley of seven counts of wire fraud, three counts of bank fraud and five counts of money laundering.

U.S. District Judge John C. Coughenour explained at the sentencing hearing that he was sending Shibley to prison because of “the blatant nature of the fraud and its size.”

In another case the Justice Department announced last week, a District of Columbia resident pleaded guilty to fraud after collecting more than $2 million in federal loans. 

Kenneth Gaughan, 43, also embezzled $438,000 from the Catholic Archdiocese of Washington, where he worked as an assistant superintendent, according to the U.S. Attorney’s Office for the District of Columbia.

Gaughan allegedly applied for millions of dollars in PPP loans while claiming to represent nine companies under the alias of Richard Strauski. The government awarded him $2.1 million in PPP and EIDL funds.

Gaughan is accused of submitting invoices to the Archdiocese for anti-bullying and crisis intervention programs and for software to send mass messages to students and families. Instead, he kept the money.

He used ill-gotten money to purchase a $300,000 yacht, a $1.13 million row house in Northeast Washington, D.C., and a $46,000 luxury sports sedan.

“While small businesses were struggling to stay afloat, Kenneth Gaughan stole taxpayer dollars to fund his lavish lifestyle, home, car and yacht,” said U.S. Attorney Matthew Graves.

Gaughan was arrested Aug. 11, 2020, and pleaded guilty in U.S. District Court for the District of Columbia to two counts of wire fraud and one count of money laundering.

The plea bargain requires that he repay the federal loans and fully reimburse the Archdiocese. He is scheduled to be sentenced June 15.

Justice Department officials said they are broadening the number of laws they invoke for pandemic-related prosecutions and lawsuits. Previously, prosecutors primarily relied on fraud charges.

In January, they indicted four managers of Medicare-certified home health agencies under antitrust laws. The managers allegedly agreed to fix the fees paid to home health aides and to avoid hiring each other’s workers during the pandemic.

In a separate case in January, U.S. attorneys accused two supermarket chains of violating the Americans with Disabilities Act for not making their internet portals for COVID-19 vaccines accessible to some disabled persons.

One of the portals made it difficult for low-vision persons who use screen-reader software to book appointments for vaccinations. A portal for the other supermarket chain required use of a mouse but would not allow low-vision customers to touch a keyboard tab to make an appointment.

The Justice Department reached settlement agreements with both supermarket chains.

Tom can be reached at [email protected]